May 17, 2023 14:07 GMT
Commerzbank Expect MXN To Trade Sideways Around Current Levels
- No one wants to categorically rule out another hike. Too often in recent months, Banxico has surprised on the hawkish side, providing strong support for the peso.
- However, the continued decline in inflation, the hawkish comments from its policymakers and the looming pause in US interest rates all point to rates remaining on hold. The majority of analysts surveyed by Bloomberg and Reuters also expect a pause tomorrow. This could put some pressure on the peso, as a minority still seems to expect another rate hike.
- Fundamentally, however, Commerzbank see the peso as well supported and expect it to trade sideways around current levels. With core inflation at 7.7%, Mexico offers an attractive real interest rate in a stable political environment.
- Moreover, Commerz expect Banxico to leave no doubt that it will promptly address any upside risks to inflation.